Texas to Cape Wind: You're Not First Yet

If you picked up a newspaper in the last week, you probably read that—after nine tortuous years of regulatory review—Cape Wind has been officially designated the first offshore wind farm in the United States. Not so fast. The distinction Cape Wind actually earned is the first wind farm to be approved by the U.S. Department of the Interior. That green light is required for every state but Texas, the current force to be reckoned with in installed U.S. wind power.

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"I was about to write a press release to congratulate Cape Wind for getting their approval," says Jim Suydam, press secretary of the Texas General Land Office, "and let them know when they're done jumping through hoops up there they can come build off the Texas Coast."

The first offshore production wind turbine in the U.S. will likely be erected this summer off the coast of Galveston, Texas, and operational by fall, says Herman Schellstede, the chief technology officer of Coastal Point Energy LLC. Formerly called Wind Energy Systems Technology (W.E.S.T. LLC), the company holds leases to five tracts of submerged land in the Gulf of Mexico, totaling 84,000 acres. A second company, Baryonyx, holds leases to two more tracts.

Texas has unique coastal sovereignty. Because of a stipulation made when the Texas republic joined the United States in 1845, its boundary extends 10.3 miles from the coast. Wind companies interested in building projects up to that distance from the shore need only sign a lease with the Texas General Land Office—and it's an eager leaser. "The future of offshore wind power in the U.S. is right here in Texas, and the Land Office is open for business," Commissioner Jerry Patterson announced when the first four tracts were awarded during a regular oil and gas lease sale in October 2007.

Federal land for all other coastal states begins 3 miles offshore, which means Cape Wind Associates had to seek the approval of the Minerals Management Service. Interior Secretary Ken Salazar announced last Wednesday that the government would grant a permit to build the 420-megawatt project, which since 2001 had been debated in dozens of public meetings and faced vehement opposition from residents, historic associations and politicians. (The process in Texas, from nomination to bid, took about 4 months.) While construction could now theoretically begin within a year, it could also face lengthy opposition in court.

"[Cape Wind] has done everything right and followed all the procedures but there's always just another way for the rug to get pulled out from underneath them," Suydam says. "I think they wouldn't run into that kind of opposition off the coast of Texas." The state's residents are used to looking offshore and seeing structures, he points out, because Texas has traditionally had a working coast.

"Texas has a long history of being energy producers, and so they're well accustomed with a very entrepreneurial attitude," says Corinne Davis, vice president of energy project development at Baryonyx. "They have a long history of offshore as well, which helps us an awful lot. There's already an existing engineering infrastructure with good ports and a good landing area. It's not as though it's virgin land that's not used to dealing with industry."

The wind resource along Texas is more comparable to the mid or south Atlantic, according to the National Renewable Energy Lab—it gets stronger further north, along Cape Cod. Electricity prices, tied to the cost of natural gas, are also lower in Texas. But that might be a worthwhile trade-off. "I've been working with the New England boys over the last few years, and they have a lot of problems, not just with environmental [groups] and residents," Schellstede says, "but when you get on shore. They have a lot of infrastructure building to do, and that's very expensive. We don't have that in Texas." -->

The two hurdles Texas wind developers do face are acquiring financing and a permit from the U.S. Army Corps of Engineers, which has jurisdiction because of navigation issues. Coastal Point Energy has both for the single 2-megawatt turbine it plans to erect this summer, which would supply power to an oil and gas platform offshore. Schellstede says the company should have financing concluded by mid-summer for the development of the rest of that tract, which would supply 300 megawatts of electricity to Galveston and the Texas grid, and anticipates the Army Corps permit by fall; he hopes to build a full-blossom Galveston operation by 2012.

Baryonyx has begun to talk with potential financing partners and is preparing its application to the Army Corps now. "Poor Cape Wind went through such a lot of trauma to get their consent," Davis says. "We're hoping ours will be somewhat quicker." Baryonyx is aiming for 2013 to begin construction on its two tracts, which combined will generate between 2.5 and 3 gigawatts, some of which would be used to power a green data center onshore.

Wind isn't the only offshore renewable resource Texas has put up for bid. Last April the land office awarded three leases totaling about 128,000 acres to Geo Texas Co. for the development of geothermal energy. When developed, directional drilling would tap into relatively shallow formations offshore that, like wind, would provide electricity to population centers along the coast (the state's population will double by 2040). Also like wind, Texas's experience with oil and gas would be an asset: "The drilling technology is extremely similar. It's just that you build a power plant on top of it instead of an oil and gas plant," says Dwain Rogers, the General Land Office's deputy commissioner of renewable energy.

The Texas Public Utility Commission is developing a rule that would require 500 megawatts of non-wind energy in the state's renewable portfolio standard. If that passes, Rogers anticipates the geothermal leases will get into production pretty quickly. As with oil and gas leases, royalties from geothermal and wind power will feed the Permanent School Fund, which helps pay for the state's share of K-12 education in Texas.

"We'll lease as much as the market would bear, because for the land office renewable energy is a renewable revenue," Suydam says. "And we recognize that oil and gas have been very, very good to Texas, but oil and gas are depletable resources. This is one of the ways we've been looking to replace that revenue stream before it's gone."